Nationwide Mutual Insurance v. Don Allen Chevrolet Co.

116 S.E.2d 780 (1960) 253 N.C. 243

NATIONWIDE MUTUAL INSURANCE COMPANY
v.
DON ALLEN CHEVROLET COMPANY.

No. 245.

Supreme Court of North Carolina.

November 2, 1960.

Kennedy, Covington, Lobdell & Hickman and Mark R. Bernstein, Charlotte, for plaintiff, appellant.

Helms, Mulliss, McMillan & Johnston and Larry J. Dagenhart, Charlotte, for defendant, appellee.

BOBBITT, Justice.

The demurrer tests the sufficiency of the modified amended complaint. The rules applicable in a hearing on demurrer have been often stated and are well settled. Pressly v. Walker, 238 N.C. 732, 78 S.E.2d 920; Buchanan v. Smawley, 246 N. C. 592, 595, 99 S.E.2d 787. Our task is to determine whether the facts alleged, liberally construed in plaintiff's favor, state a cause of action.

Plaintiff, as subrogee, acquired only such rights against defendant as Jo Ann Glenn, its insured, possessed; and plaintiff's action is subject to all defenses defendant might have invoked if the action had been instituted by Jo Ann Glenn. 46 C.J.S. Insurance § 1211; 29A Am.Jur., Insurance § 1720; Burgess v. Trevathan, 236 N.C. 157, 160, 72 S.E.2d 231, and cases cited.

Hereafter Jo Ann Glenn will be referred to as the buyer.

Plaintiff asserts the allegations of the modified amended complaint "state alternative causes of action against the defendant, any one of which will support a recovery." These alternative causes of action, so plaintiff contends, are (1) for breach of express warranty, (2) for breach of implied warranty, and (3) for negligence.

Our decisions are in accord with the provision of the Uniform Sales Act that "any affirmation of fact or any promise by the seller relating to the goods is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the goods, and if the buyer purchases the goods relying thereon." (Our italics.) Potter v. National Supply Co., 230 N.C. 1, 7, 51 S.E.2d 908, 912, and cases cited; Underwood v. Coburn Motor Car Co., 166 N.C. 458, 82 S.E. 855.

Plaintiff's allegation is that the seller "assured" the buyer "that if any defects in materials or workmanship in said automobile should develop, or appear within ninety (90) days after purchase or prior to the same having been driven four thousand (4,000) miles, that such defects would be made good" by the seller and "without cost" to the buyer. It is not alleged that that the seller made any other affirmation or promise. Compare Hill v. Parker, 248 N.C. 662, 104 S.E.2d 848. Moreover, there is no allegation as to implied warranty.

Plaintiff alleges that, when the car was delivered to the buyer on January 15, 1957, there were defects (1) in the electric wiring and ignition system and (2) in the fuel supply system; that the buyer took the car to defendant on February 16, 1957, for inspection and for correction of said defects; and that the buyer, after defendant returned the car to her, discovered said defects had not been corrected. The word "negligence" does not appear in plaintiff's allegations; and, unless implied from the allegations referred to above, there is no allegation that defendant failed to exercise due care to perform any legal duty it owed the buyer.

Upon breach of warranty as to quality, a buyer, at his election, may rescind unless he is barred by retention and use of the article of personal property after he discovers or has reasonable opportunity to discover the defect. Hendrix v. B & L Motors, Inc., 241 N.C. 644, 86 S.E.2d 448. Here, it is alleged the buyer discovered said defects immediately after receiving the car on January 15, 1957, but retained possession and continued to use the car until the fire (caused by said defects) on February 22, 1957. These facts barred any right of the buyer to rescind. See Hill v. Parker, supra, 248 N.C. at page 667, 104 S.E.2d at page 851, and cases cited. Moreover, the buyer did not at any time, either before or after the fire, purport to rescind the sale. Indeed, plaintiff's allegations do not disclose the purchase price paid by the buyer. They do disclose that, incident to the settlement with its insured, plaintiff acquired the damaged automobile.

A buyer's alternative remedy is to sue for damages; and, in such case, the measure of damages ordinarily recoverable for breach of warranty is the difference between the reasonable market value of the article as warranted and as delivered, with such special damages as were within the contemplation of the parties. Hendrix v. B & L Motors, Inc., supra, and cases cited; Underwood v. Coburn Motor Car Co., supra, and cases cited. Here, assuming plaintiff has sufficiently alleged warranty and breach thereof, there are no allegations as to the reasonable market value of the car as warranted or as delivered. Hence, under plaintiff's allegations, the damages recoverable, if any, must fall in the category of special (consequential) damages.

If it be conceded that plaintiff's allegations are otherwise sufficient to state a cause of action either for breach of warranty or for negligence, we are confronted by the fact plaintiff has affirmatively alleged that, immediately after the car was delivered to her on January 15, 1957, the buyer "experienced serious difficulty in starting the motor of said automobile and immediately observed a strong odor of gasoline fumes in and about said automobile," and "upon examining the motor and other parts of said automobile under the hood thereof, it was discovered that the motor and other areas of said automobile under the hood were saturated with gasoline," and that she operated the automobile continuously with knowledge of these conditions from January 15, 1957, until the fire on February 22, 1957. It is noted: Plaintiff did not allege that the buyer, apart from inspection made by defendant on February 16, 1957, made any effort whatever to have the defects corrected by defendant or otherwise.

As to warranty, it is our opinion, and we so hold, that damages caused by the buyer's continued use and operation of the automobile with knowledge that the ignition system was defective or maladjusted and that the motor and other parts under the hood were saturated with gasoline cannot be considered damages within the contemplation of defendant and the buyer. Indeed, it is inescapable that damages caused by the continued use and operation of the automobile under these circumstances must be attributed to negligence on the part of the buyer.

In 3 Williston on Sales, Revised Edition, § 614b, under the caption, "Consequential damages not contemplated are disallowed," it is stated: "If the buyer's own fault or negligence contributed to the injury, as by using the goods with knowledge of their defects, he cannot recover consequential damages, since such damages were under the circumstances not proximately due to the breach of warranty." Decisions are cited in support of the quoted statement.

In 46 Am.Jur., Sales § 801, it is stated: "It appears to be generally held however that a buyer whose negligence has contributed to the loss cannot recover for injuries sustained by reason of a breach of warranty."

In Sutherland on Damages, Fourth Edition, Vol. 1, p. 317, § 89, it is stated: "So where property is sold with a warranty of fitness for a particular purpose, if it be of such a nature that its defects can be readily, and in fact are, ascertained, yet the purchaser persists in using it, whereby losses and expenses are incurred, they come of his own wrong and he cannot recover damages for them as consequences of the breach of warranty."

In Driver v. Snow, 245 N.C. 223, 95 S.E.2d 519, 521, the plaintiff, based on alleged breach of implied warranty, sought to recover damages for personal injuries resulting from an explosion of a secondhand coal stove sold by defendant to plaintiff. In affirming judgment of involuntary nonsuit, Higgins, J., quoted with approval this statement from the opinion of Nash, J., in Hudgins v. Perry, 29 N.C. 102; "An implied warranty cannot extend to defects which are visible, and alike within the knowledge of the vendee and the vendor, or when the sources of information are alike open and accessible to each party." In distinguishing the cases relied upon by the plaintiff, Higgins, J., said: "They deal with latent defects not discoverable by ordinary examination." Here, according to plaintiff's allegations, the buyer had actually discovered and was fully aware of the alleged defective condition of the automobile.

As to negligence, the applicable legal principles have been recently stated. Kientz v. Carlton, 245 N.C. 236, 96 S.E.2d 14; Tyson v. Long Manufacturing Co., 249 N.C. 557, 107 S.E.2d 170; Lemon v. Buchan Lumber Co., 251 N.C. 675, 111 S.E.2d 868. Here, according to plaintiff's allegations, the alleged known defective condition was obvious, not latent; and such known defective condition was of such nature that the hazards reasonably foreseeable from the continued use and operation of the automobile were patent.

In Gwyn v. Lucky City Motors, Inc., 252 N.C. 123, 131, 113 S.E.2d 302, the cause of the hazard was not obvious but concealed; and on this ground Gwyn was distinguished from Harley v. General Motors Corp., 97 Ga.App. 348, 103 S.E.2d 191, a Georgia decision presently in point.

The facts that defeat plaintiff's alleged cause of action appear on the face of the modified amended complaint. Moreover, the demurrer is special, pointing out specifically these alleged facts as a bar to plaintiff's action. Hence, they are for consideration in passing upon the demurrer. Harrell v. Powell, 251 N.C. 636, 639, 112 S.E.2d 81, and cases cited.

In Aldridge Motors, Inc., v. Alexander, 217 N.C. 750, 9 S.E.2d 469, cited by plaintiff, the appeal was from an order denying defendant's motion to strike designated portions of the complaint. In this Court, the defendant demurred ore tenus to the complaint for failure to state facts sufficient to constitute a cause of action. This Court overruled the demurrer because the asserted ground of demurrer involved an affirmative defense defendant was required to allege and prove. Analysis of the record discloses a factual situation quite different from that here considered.

In Aldridge, both plaintiff and defendant were automobile dealers. Cars sold by Aldridge were purchased by Aldridge from defendant. A car sold by Aldridge to one Martin was delivered to Martin by defendant. In an action based on breach of implied warranty, Martin sued and obtained judgment against Aldridge. Thereafter, Aldridge instituted the action (involved in the appeal) to recover from the defendant the amount of Martin's judgment. The asserted ground of demurrer was that Aldridge, notwithstanding it had knowledge of the alleged defects soon after the car was delivered to Martin, failed to notify defendant thereof and thereby afford defendant an opportunity to correct such defects, and that by reason of such failure Aldridge was estopped to maintain the action. Suffice to say, the facts upon which the defendant relied as basis for the plea of estoppel interposed by demurrer were not alleged by Aldridge; and, since they did not appear on the face of the complaint, they were not for consideration in passing upon defendant's said demurrer.

Having reached the conclusion that the facts alleged in the modified amended complaint do not state a cause of action, it is unnecessary to consider whether Judge Carr's order sustaining defendant's demurrer to the original complaint constitutes res judicata as to the matters alleged in the modified amended complaint.

For the reasons stated, the order of Judge Craven sustaining the demurrer to the modified amended complaint is affirmed.

Affirmed.